Simon Property Group has terminated its proposed merger agreement with Taubman Centers. Simon also has filed an action against Taubman. requesting a declaration that Taubman has suffered a Material Adverse Event under the merger agreement, and that it has breached the covenants in the agreement governing the operation of Taubman’s business.
The termination is based on two separate and independent grounds:
- The COVID-19 pandemic had a “uniquely material and disproportionate effect on Taubman” compared to other property management companies; and
- Taubman has breached its obligations relating to the operation of its business because it “failed to take steps to mitigate the impact of the pandemic as others in the industry have, including by not making essential cuts in operating expenses and capital expenditures.”
“The merger agreement specifically gave Simon the right to terminate the transaction in the event that a pandemic disproportionately hurt Taubman,” according to a Simon statement. “Taubman’s significant proportion of enclosed retail properties located in densely populated major metropolitan areas, dependence on both domestic and international tourism at many of its properties, and its focus on high-end shopping have combined to impact Taubman’s business disproportionately due to the COVID-19 pandemic when compared to the rest of the retail real estate industry. In addition, Taubman has breached its obligation to operate its business in the ordinary course.”